President Signs Into Law Cummings and Meadows Bill to Modernize Federal Thrift Savings Plans
President Signs Into Law Cummings and Meadows
Bill to Modernize Federal Thrift Savings Plans
Washington, D.C. (Nov. 18, 2017) – Today, President Donald Trump signed into law legislation introduced by Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, and Rep. Mark Meadows, Chairman of the Subcommittee on Government Operations, to add more flexibility for federal employees and retirees to withdraw funds from their accounts under the Thrift Savings Plan (TSP).
“Rep. Meadows and I introduced this bill to give TSP participants what they want—greater flexibility to withdraw money from their accounts to address unexpected life events—and I am thrilled that they will now get to take advantage of this common-sense reform,” Cummings said. “Now the TSP will be better aligned with other retirement plans offered by the private sector and state and local governments, and participants will be encouraged to keep their TSP accounts to take advantage of low administrative fees even after they retire or separate from federal service.”
“I’m grateful for my friend Rep. Cummings’ work on this common-sense reform, and I’m thankful to see the bill become law,” Meadows said. “Ultimately, it comes down to one simple principle: providing greater flexibility for federal employees. It will give TSP recipients more access to their own funds and, over the long term, allow them the opportunity to continue taking advantage of benefits similar to those available throughout the private sector after federal service.”
Prior to this law being signed, participants were limited to one withdrawal from their TSP accounts while in federal service upon reaching the age of 59 1/2 (age-based withdrawal). Participants who left federal service could make only one withdrawal of a portion of the balance in their account (post-separation withdrawal).
Cummings’ and Meadows’ bill, H.R. 3031, the TSP Modernization Act of 2017, eliminates these restrictions and allows participants to make multiple age-based and post-separation withdrawals, revises the timing and amounts of periodic payments, and allows participants to elect to combine partial withdrawals or an annuity with periodic payments. The bill also eliminates automatic annuities as a default option in the absence of an election by participants.
A survey issued in 2014 by the Federal Retirement Thrift Investment Board of TSP participants who withdrew funds showed that more than 50% reported that they would like to access additional funds from their TSPs to address life events.
A study issued by Vanguard in 2013 entitled Retirement Distribution Decisions Among DC Participants found that “50% more participants and assets remain” in retirement plans when partial distributions are allowed.
This bill was supported by the Federal Retirement Thrift Investment Board, the agency that administers the TSP, as well as The National Active and Retired Federal Employees Association, The American Federation of Government Employees, and National Treasury Employees Union.